Decade" serves as a recent antecedent to the UMP that followed the financial crisis. Japanese asset prices soared to historic highs in the late 1980s as the Japanese economy hummed and the relatively huge cohort of postwar Japanese baby boomers invested for their retirements. The Shiller cyclically adjusted price-toearnings (CAPE) ratio for the Japanese market topped 90 in January 1990. For comparison, the CAPE ratio for the S&P 500 has varied from about 5 to 45 from 1880 to 2020 (Siblis Research (2017), Mizrach and Neely (2020)). Japanese equity and real estate prices had become unsustainable and then plunged in the early 1990s, sending the Japanese economy into prolonged stagnation and deflation (Figure 1).From 1991 to 2000, the BOJ responded to this stagnation by repeatedly lowering its conventional policy rate. The Japanese authority also employed some FG on April 13, 1999, promising essentially zero interbank interest rates until deflationary concerns are dispelled. 3 Dissatisfied with the results of this zero interest rate policy (ZIRP), the BOJ turned to UMP on March 19, 2001, switching its main policy instrument from the uncollateralized overnight call rate to the quantity of reserves held by financial institutions with the central bank. 4 The BOJ initially targeted bank reserves at ¥5 trillion ($41 billion), an increase of roughly ¥1 trillion ($7 billion) from previous levels and stated that it would maintain its accommodative policy until inflation-which had been significantly negative-firmly reached 0 percent. 5 The BOJ purchased long-term Japanese government bonds (JGBs) and asset backed securities (ABS) to reach its reserves target, which increased nine times over the next four years, ultimately reaching a target range of ¥30 to ¥35 trillion ($247 to $288 billion). The expansion of BOJ's balance sheet reflects the progressive increases in reserve targets over this span (see Figure 2). 6 Bank reserves were a very small part of the Japanese monetary base, which consisted largely of currency, so this policy produced only a which funded purchases of long-term Treasury notes through equal sales of short-term Treasury bills. In June 2012, the FOMC responded to stubbornly weak labor market conditions by extending the MEP to December 2012. In September 2012, the FOMC announced a third round of outright asset purchases (QE3), under which it purchased $40 billion in MBSs each month, indefinitely, again with housing markets in mind. In December 2012, the Fed announced it would add $45 billion per month in Treasury purchases to the existing QE3 MBS purchases. Bond purchases comprised a very important part of the Fed's UMP, reflecting the importance of bond markets in the U.S. economy (Bini Smaghi (2009)).

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I n Part 1 ("Divergent Markets") of this three-part series, we document that the recent divergence in inventories of new and existing homes seems to reflect a scarcity of lower-and middle-tier homes. We now examine one potential factor contributing to this shortage: rental demand. Specifically, we investigate two channels through which this factor may have affected the supply of housing: increased conversion of single-family properties into rental units and a shift in new residential construction from single-family to multifamily units. Over roughly the past decade, there has been a dramatic shift away from homeownership in favor of renting. According to the U.S. Census Bureau American Community Survey (ACS), in 2016 there were over 7 million additional renter-occupied housing units (including both single-family and multifamily structures) relative to 2006-an increase

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